Uncertainty of Money Demand in Iran (1990-2010)

This study aims to examine the impact of uncertainty on the demand for money in Iran form 1990Q1 – 2010Q4. First, I focus on the relation between uncertainty and demand for money with the emphasis of Keynes conception. Using autoregressive distributed lag (ARDL) approach of cointegration. My empirical results indicate that the effect of the GNP and uncertainty index on real money demand is positive and significant while inflation rate on real demand for money is negative and significant. Furthermore, the results of the model estimation indicate that the effect of uncertainty on M1 is negative and insignificant, but the effect of uncertainty on M2 is positive and significant.